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Q: But couldn't they just get burned again? A: Sure, but the likelihood isn't very high. Medicare+Choice was growing. Then Congress cut back on the reimbursement in areas where it was doing well in order to shift money to rural areas where it couldn't function. As a result, the plan didn't get any takers in the rural areas, and they starved the suburbs and urban areas. Is that kind of problem possible? Sure. But the probability [of it happening with the new Medicare plan] is so much lower.
Q: Liberals say the drug benefit is too skimpy. What's your response to that? A: Look at a senior citizen who has to make a choice right now of not being able to purchase drugs and [must] split the pills or take them in an irrational way because of the cost. The federal government is going to pay 80% [of drug costs] in the House bill and 50% in the Senate bill. I can't imagine that any senior who's having financial difficulties isn't going to jump at that opportunity.
And the lowest-income individuals -- [earning] up to 160% [about $15,000 a year for a single person] of poverty [level] in the Senate bill -- really are getting subsidized tremendously [under the proposed legislation]. Those under 135% of poverty [would pay] 3% of total [drug] costs. That's going to cover the vast majority of seniors.
Q: The House and Senate are struggling with ways to encourage companies to maintain retiree health benefits. How important is that to you? A: It's very important. I don't think we've solved that problem yet. I don't have an answer, but we're working on that. We're trying to find language that would be much more beneficial for companies to stay in and not dump [retirees] on to the Medicare system, which could very easily happen. It's a problem that we have to try and find a solution to.
Q: Which do you like better, the Senate bill or the House bill? A: There are positives and minuses in each proposal. Our job in the Administration is to wed the two and develop a package that's good at competition and big on reform and gives the maximum benefits to the lower-income population.
Q: Are provisions to encourage the use of generic drugs part of the push to help seniors? A: The drug card that we hope to have set up and running by January of next year will reduce [seniors'] drug costs by between 20% and 25%. That would be a very positive step. We think the encouragement of generics -- something we've already done through the Food & Drug Administration -- is another positive thing. And with competition, [insurance] companies are going to be using their purchasing power with drug companies to also lower drug costs.
Q: Has Medicare been defused as a political issue? A: It hasn't been defused yet because it hasn't passed. The President is going to get very positive marks from the public next year. This is one of those items that when you wed the policy with [good] politics, you come out very much a winner.
Q: Insurance companies worry that as costs rise, the pressure from Washington to hold down expenses will build. Drug companies fear they're going to end up with price controls. Do they have reasons to be concerned? A: The drug companies are nervous -- and rightly so. There's definitely going to be a reduction in their pricing. The drug card is going to [mean] a reduction. When you have competition, that's bound to drive down the price as well. They also recognize full well that $400 billion to purchase drugs is going to pharmaceutical companies.
Q: What progress are you making with Medicaid reform? A: Not as much as I would like. We met with 10 governors, and I thought the meeting went very well. But it has gone the other way now. I think they're getting a lot of pressure from members of the Democratic congressional delegation, which doesn't want them to do anything on Medicaid because of Presidential politics. We were making a lot of progress, and all of a sudden it stopped.
Q: Can the work you're doing on prevention [of illnesses] make a dent in rising health-care costs? A: Absolutely. It's the future. We spend $155 billion a year on tobacco-related illnesses and $132 billion on diabetes, which can be influenced by diet and exercise. If we don't do something, that $132 billion will double in five years, to $264 billion.
And we spend $117 billion on obesity -- that's the fastest-growing disease. That's more than $400 billion on three illnesses. If you're really going to have an impact health-care dollars and the quality of life in America, you have to address those three big items. We have to lose weight, we have to exercise, we have to stop smoking or reduce smoking. If we do that, we'll have the biggest impact on health-care spending than anything else we can do.
Copyright 2003, Bloomberg L.P.
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